DFS SUPERINTENDENT VULLO REMINDS BANKS OF STATE LAW REQUIREMENT TO OBTAIN PRIOR REGULATORY APPROVAL OF ACQUISITIONS
OR CHANGES IN CONTROL OF BANKING INSTITUTIONS

Guidance Addresses Concerns That Some Investors Have Been Developing Non-Transparent Methods of Acquiring and Controlling Banking Institutions without Obtaining Prior Regulatory Review and Approval

Financial Services Superintendent Maria T. Vullo today announced that the New York State Department of Financial Services (DFS) has issued interpretative guidance in response to a request by the New York Bankers Association regarding the New York Banking Law requirement of the Superintendent’s prior approval for an acquisition or change of control of a banking institution. The interpretative guidance has been issued due to a concern that some investors have been developing non-transparent methods of acquiring and controlling banking institutions without obtaining prior regulatory review and approval by DFS.

“DFS is reminding state-chartered banks that all proposed changes of control in any banking institution must be submitted to the Department for prior approval under our mandate to safeguard the institutions we supervise and regulate, and to protect the public they serve,” said Financial Services Superintendent Maria T. Vullo.

The objective of the interpretative guidance is to ensure that the Department has an opportunity to fully review any change of control before it occurs, irrespective of the methods or techniques used for the acquisition of control, and that the Superintendent’s prior approval is required before any change of control may occur. This guidance specifically relates to Sections 143-b and 141(2) of the New York Banking Law.

As described in the DFS guidance, “control” is achieved through having the power, whether directly or indirectly, to direct or cause the direction of the management and policies of a banking institution through the ownership of voting stocks or otherwise. Control is presumed to exist if an entity or individual or any combination thereof, directly or indirectly, owns, controls or holds with the power to vote 10% or more of voting stocks. Control is also achieved when individuals and/or entities work together or act in concert, whether expressly or otherwise, to acquire control of a banking institution but with each individual and/or entity staying below the threshold required for seeking the Department’s prior review and approval.